Marginal ROAS

Definition

Marginal ROAS is the incremental revenue generated by the next unit of ad spend. It is the metric you want for scaling decisions under diminishing returns.

Formula

Marginal ROAS = incremental revenue / incremental ad spend

Example

If an extra $10k of spend generates $25k of incremental revenue, marginal ROAS = $25k / $10k = 2.5.

How to use it

• Use marginal ROAS (or incremental profit) to decide when to scale or cut spend.
• Average ROAS can remain high even when marginal ROAS falls below break-even.
• Marginal ROAS is best estimated from experiments or response curves, not attribution alone.

Common mistakes

• Scaling based on average ROAS rather than marginal profit.
• Ignoring margin/variable costs (revenue-only ROAS can mislead).

Why this matters

This term matters because it affects how you interpret performance and make budget decisions. If you use inconsistent definitions or windows, ROAS/CPA can look "better" while profit gets worse.

Practical checklist

• Write a 1-line definition for "Marginal ROAS" that your team will use consistently.
• Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
• Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
• Use a calculator that references this term (e.g., Marginal ROAS Calculator) to sanity-check assumptions.
• Read the related guide (e.g., Marginal ROAS: how to scale ads with diminishing returns) for context and common pitfalls.

Where to use this on MetricKit